Tuesday, December 22, 2009
Today I will be discussing a few of the most profitable home improvement projects of 2009. This information comes from the 2009 Cost vs. Value report created by Remodeling Magazine.
Replacing an entry door was the most profitable home improvement project of 2009. The average cost of replacing a front entry door was $1,172 and the average return on investment was 128%. This high return on investment indicates that first impressions are very important to homebuyers.
Adding an attic bedroom is also another smart home improvement if you are looking for some more space in your home. This is one of the more expensive home improvement projects that a homeowner can perform, but the return on investment for this project is not bad coming in at 83.1%.
Looking for more space to entertain? Adding a wood deck is a great solution to that problem. It's average cost to add wood deck to a home was a little above $10,000 in 2009, and the return on investment for that project was 80.6% in 2009.
Mid-range bathroom and kitchen upgrades also proved to be a smart home improvement upgrade in 2009 with an average return on investment of 71% and 72% respectively. Upscale bathroom and kitchen upgrades had a return on investment of about 10% less than the mid-range kitchen and bathroom upgrade.
Is it time to replace those old windows? Go ahead and replace them with new vinyl windows. The average return on investment for this project in 2009 was 83.6%
Finally, replacing your siding with fiber cement siding also proved to be a financially sound home improvment project with an average return on investment of 76.5%.
To see the cost and return on investment of all of the home improvement projects, visit http://www.remodeling.hw.net/2009/costvsvalue/national.aspx
Monday, December 14, 2009
Today I will be discussing a great new FHA mortgage that can be used to purchase and fix up homes. This loan is called the FHA section 203K mortgage.
OVERVIEW OF FHA 203K MORTGAGES
In today's real estate market, we face a challenge because there are a lot of homes for sale that are in need of being fixed up in order to for them to be habitable. Many of these properties can be purchased for a great price, but after the homeowner purchases the home, they either have to have the cash to fix up the properties or they have to take out construction loans to fix up the home. These loans a lot of the time have interest rates that are a good bit higher than a typical 30 or 15 year fixed rate mortgage. Also, a lot of construction loans have balloon payments where the person who takes out the loan has to make a very big payment to pay back the majority of the loan at one time. Because of this situation, many of these "fixer upper" homes, which a lot of the time are bank owned properties, are never purchased and just sit on the market.
The new FHA 203k mortgage helps people who would like to purchase a home for a great price and fix it up. The mortgage amount includes the purchase price of the home plus the amount of money that it will cost to fix up the home. This is great because this means that the homeowner does not have to deplete his or her cash or obtain expensive construction loans to fix up their home. The cost of fixing up the home is amortized into the monthly mortgage payments at an interest rate just a little bit above a normal FHA mortgage loan. The new FHA 203K mortgages can also be used to refinance a home as well.
HOW IT WORKS.
The way that the new FHA 203K works is as follows. First, you locate the property that you want to purchase, and you write an offer on the property for a price that you think is fair. Once you have an executed purchase contract, you submit the contract along with estimates of how much it will cost to fix up the home to your FHA approved lender. There has to be at least $5,000 worth of repairs in order for a person to qualify for this loan. Once you close on the home, part of the loan proceeds go to pay off the person selling the house, and the other part of the loan proceeds go into an escrow account where it is held to pay for the repairs needed to be done to the home. The new homeowner draws the money out of the escrow account as he or she makes repairs to the home. You do not have to take the money out of the escrow account all at once at the end of the completion of all of the repairs. You are allowed to make repairs in steps and take money out of the escrow account as you go. You do have to have cash to make the initial repairs, and when you draw money out of the escrow account, you are being reimbursed for those repairs.
WHAT TYPE OF REPAIRS ARE ALLOWED
The types of repairs that are allowable under the FHA 203 K mortgages are pretty broad. The amount of repairs to be done has to be at least $5,000. The types of repairs that are allowed to be financed with the FHA 203k loan include the following.
- Structural alterations and new construction
- Repairs done to eliminate health and safety hazards
- Changes made for aesthetic appeal
- Installation or replacement of air conditioning system and repairs made to air conditioning system
- Installation of well, septic system, or cost to connect home to public utilities
- Roofing, gutter downsprouts, flooring, tiling and carpeting
- major landscape or site improvements
- improvements made for accessibility and functions for disabled.
- Making energy conservation improvements.
What type of properties are eligible for FHA 203K
Not all properties are eligible for the FHA 203K Loans. Residential properties that have 1-4 units are allowed. This would include detached single family homes, townhouses, condos and the residential portion of mixed use property. You are also allowed to purchase a home and purchase a seperate piece of land and move the home to the new piece of land. The purchase of demolished homes are also allowed as long as some of the existing foundation systems remain in place. Coopertive units are not allowed to be financed under this program.
Condos are allowed to be financed only under certain condtions.
- First off, only the inside of condos are allowed to be rehabilitated. The condo association that the condo is a part of is responsible for maintaining and fixing the exterior of the condo.
- The person purchasing the condo must be the owner occupant or a qualified non-profit borrower. No investors purchasing condos are eligible.
- Each building in the condo project must contain no more than four condos per building
- The condo project must be approved by HUD by no later than closing.
- Only the lesser of 5 units per association or 25% of the total units, can be undergoing rehabilitation at one time.
- The maximum mortgage amount cannot exceed 100% of the after improved value of the condo.
How do I qualify for the FHA 203K Mortgage.
Qualifying for the FHA 203k Mortgage is pretty much the same as qualifying for a regular FHA insured loan as long as the property and the type of repairs to be completed are permissable as mentioned above. The FHA approved lender is going to look at credit score, income, expenses and assets of the borrower in order to approve the borrower for the loan.
How do I get started.
- Select and have a meeting with an FHA approved lender
- Locate a property that you would like to puchase
- Find out what needs to be repaired in the home and get an estimate of the repairs that need to be done
- Find out what the expected market value of the home will be once the work is completed. You can do this with the help of your REALTOR, or you can have an appraisal done by a property appraiser.
Monday, November 30, 2009
- Your front door greets the prospect. Make sure it is fresh, clean and newly painted, and if needed, has a new coat of linseed oil ( furniture polish)
- Hose off exterior wood and trim. Remove any wasp nests or cobwebs. Clean out gutters if needed. If safe enough, sweep the debris from the roof.
- Repair any torn screens or replace missing ones.
- If gutters or wood trim are in need of paint because of obvious cracking, peeling, or chipping, it is best to repaint those areas.
- If you have window air conditioning units, wipe them clean and remove any rust which may have accumulated around condensation areas.
- If you have an outdoor patio or deck, be sure it is kept swept of leaves or pine needles. Any lawn furniture, gas grills, or exposed wood should be clean and in good repair. Mildew should be removed.
- Examine all woodwork, door frames, and doors to be sure they are free of fingerprints, dust or dirt.
- Keep oven, stove, or surface units, and all porcelain or stainless steel clean. Formica counter tops and cabinet doors should be spotless. Fix any faucet leaks and keep sinks clean. Kitchen accessories on top of counters should be kept to a minimum and be neatly arranged.
- Whether you have any hardwood floors, wall to wall carpeting, linoleum or any combination of these, keeping them clean is important.
- Bathrooms are difficult to keep straight and clean, but they are of great importance in their overall appearance. If grout between tiles has cracked, mildewed or chipped out, re-caulk and use a good cleaning product.
- Replace old furnace or air conditioning filters, and remove any dust accumulation from heat registers or vent covers.
- If doors stick or folding doors are off track, repair them. Review items such as vent covers for loose or missing screws and replace them. Storage is important to any prospective home owner. Crowded or cluttered closets and other storage areas may suggest a storage problem. Clean out closets where possible. It may be a good time for a garage sale! A spacious appearance in any storage area is extremely important.
- If any rooms within the house are dark during daylight hours, keep drapes or curtains open, and if necessary, keep a lamp on. Replace burned out bulbs.
- If repainting on the inside is absolutely necessary, use neutral colors.
- Gleaming, clean windows say a lot about your home and you. Use attractrive curtains, freshly laundered, and keep fresh bedspreads in the bedrooms.
- Don't dump paper or trash in the fireplace. Keep as neat as possible.
- Tighten door knobs, window fittings, and other hardware.
- Don't try to hide problems. Cracks in walls, concrete, broken appliances, roof leaks, wet basements, ect, should be repaired.
- Be sure all steps are free of hazards.
Yard and Grouds:
- Keep the lawn cut and trimmed. Trim Shrubs, if needed. Remove clippings.
- Keep area around garbage cans neat and free of trash.
- Stack wood piles neatly.
- Keep drives and walks swept clean and free of branches, pine needles, leaves, ect.
- Keep surface water drainage areas or natural streams free from debris that may cause water to stand and stagnate.
Saturday, November 7, 2009
Yesterday President Obama Signed H.R. 3548 which both extended and revised the current tax credit available to first time home buyers who purchase a home. The tax credit has been extended. People purchasing a home must have a home under contract by April 30th 2010, and for those purchases that have been put under contract by April 30th 2010, they must close by June 30th 2010. The tax credit was also revised to include "step up" buyers. Also, the income limits for which people can qualify for the tax credit have increased.
For first time homebuyers, the tax credit is essentially the same. The only difference for first time home buyers is that after November 30th, the income limitations for which they can receive the tax credit have moved up from $75,000 to $150,000 for single taxpayers and from $150,000 to $225,000 for tax payers who are married and file joint returns. The tax credit phases out incrementally for every $20,000 increase in income above the $150,000 and $225,000 income limits.
The new bill signed into law yesterday by Obama also now includes a $6,500 tax credit that is available to "step up" buyers. These are buyers who sell their home to purchase a larger or more expensive home. In order for these step up buyers to qualify for the $6,500 tax credit, they have to have lived in their current princapal residence consecutively for any 5 years out of the last 8 year period. The deadlines and income restrictions are the same for $6,500 step up buyer tax credit as they are for the $8,000 first time homebuyer's tax credit.
The extension and revision of the tax credit available to first time homebuyers and step up buyers is a great opportunity for those thinking about purchasing a home in the near future. With the tax credit, very low interest rates, low home prices and a wide selection of homes to choose from, right now is indeed a great time to buy a home. When a country falls into a recession, money does not disappear, it simply changes hands. In this recessionary period is it possible that a large amount of wealth is shifting to people who are purchasing homes right now at very low prices? Just a thought to ponder. Have a great week!
Saturday, October 17, 2009
Obtaining Financing in Today's Market Part 2 of 3. ( The ten Commandments when applying for a home loan).
Last week I began my discussion on how to attain a home loan in today's credit tight economy. I spoke last week about income and credit requirements that you need to qualify for a home loan, and I also talked a little bit about the different types of home loans that are currently available to consumers.
Today I will be discussing the things that you should not do when you are looking to buy a home. I have created a list of ten things that you should not do when you are about to apply for a home loan. The idea behind this list is that before you apply for a home loan, you do not want to do anything that is going to increase your debt, reduce your income or lower your credit score. In fact, you should obey this list not only before you apply for a home loan, but you should obey the list all the way until your home loan has been reviewed and approved by the underwriting department or after you close on your home.
Here are the ten commandments when applying for a real estate loan. I hope you find this useful.
- Thou shalt not change jobs, become self-employed or quit your job.
- Thou shalt not buy a car, truck or van (or you may be living in it)!
- Thou shalt not use charge cards excessively or let your accounts fall behind.
- Thou shalt not spend money you have set aside for closing.
- Thou shalt not omit debts or liabilities from your loan application.
- Thou shalt not buy furniture.
- Thou shalt not originate any inquiries into your credit.
- Thou shalt not make large deposits without first checking with your loan officer.
- Thou shalt not change bank accounts.
- Thou shalt not co-sign a loan for anyone.
Saturday, October 10, 2009
Today's topic relates to obtaining financing to purchase a home. As you may already know, it is certainly more difficult to get a loan to buy a home today than it was a couple years ago. The days of stated income loans and sub prime loans are about as dead as disco. This is probably good though since giving out loans to people who should not have been getting loans is one of the main reasons that our economy is in the dumps right now.
So how can you obtain financing in this tough economy? What are some loan options available to people looking to buy a home these days? What loan options do first time homebuyers have these days? These are all great questions, and I will answer all of these in detail.
First off, let's start with the basics of what you need to do to get a home loan. The main things that lenders are going to look for these days before they issue a loan is whether the potential borrower has the ability to make mortgage payments, and also is the potential borrower willing to make his/her mortgage payments. The lender will also look at how much of a downpayment the borrower is making on the home.
When the lender looks at the borrower's ability to pay, the lender is going to look at the borrowers income and expenses. Typically, the lender will not want to see mortgage payments exceed around 30% of the borrower's total income, and they will not want to see total expenses exceeding about 40% of total income. Those percentages are general guidelines, and they might deviate just a little depending on the borrowers credit score and whether or not the borrower is obtaining financing through a Conventional, FHA, VA loan or the USDA Rural Development Loan.
The lender is also going to want to see that you have held your job for 2 years. Again that is an average, the lender might be flexible with that number if your credit score is really high. If you are self employed, they might want to see documented income going back five years.
The other thing that the lender is going to look at is the borrower's willingness to make their mortgage payments. The best way to measure to a buyer's willingness to make their mortgage payments, is their credit score. Lenders are paying a lot of attention to credit scores these days. In today's market, you will need to have a minimum credit score of 620, but even at that score it may be difficult to obtain financing. You really should make it a goal to have a credit score of about 680 or more if you are serious about obtaining financing to purchase a home.
The requirement for credit score will be slightly different based upon what type of financing you are getting (Conventional, FHA, VA or USDA Rural development loans.) The credit score requirement will also depend on whether or not you a purchasing a primary residence, secondary residence, or investment property. The minimum credit score requirements for a conventional loan is about 680. For the other loans listed above it is somewhere around 620. Those two numbers are if you are buying a primary residence. If you are buying a second home or an investment property, the credit score requirements may be higher.
The third thing that lenders are going to look at when deciding whether or not they are going to loan you money to purchase a home, is the size of the downpayment you are putting on the home. If you get conventional financing, you are going to be required to put down 10% if you are purchasing a primary residence and 20% or more if you are purchasing a second home or an investment property. With FHA financing, you will will required to put down 3.5% downpayment on a primary residence. If you obtain financing through the VA or through the USDA Rural Developement Loan program, you don't have to put down any down payment. If you are a buyer who can make your monthly mortgage payments, but you do not have a lot of cash for a down payment, FHA, VA and the Rural Development Loan are great options for you. Those loan options are great for first time homebuyers as well.
It is important to note that a lot of lenders are requiring very high downpayments (as high as 30%) if you are purchasing a condo. If you are purchasing a condo, tell your lender up front that it is a condo.
The USDA Rural Development loan program is a loan program that has been recently created. You can only qualify for this loan if the property you are looking to buy is located in an area that is approved by the USDA Rural Development loan program. Usually the property will be located in a rural area such as in small towns or on the outskirts of cities. For instance, in Tallahassee, houses in Killearn Lakes would qualify for the loan. Almost all homes in Wakulla and Crawfordville would qualify as well. To check to see if a propery is eligible for this loan, visit http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
What I have talked about above are the basics that you need to understand if you are thinking about getting financing to purchase a home. You need to have a good source of income with your mortgage payment not exceeding about 30% or your income and total expenses not exceeding around 40%. If you have good credit, those percentages might be a little higher. If you want to find out if you can obtain financing, go speak with a lender. They can pre qualify you in just a few minutes and give you a realistic picture about your ability to buy a home. If you cannot buy a home at the present time, they will tell you what you need to do in order to qualify for a home loan.
Tune in next week to learn about the do's and don'ts if you are about to apply for a home loan.
Saturday, October 3, 2009
Today I am going to talk about the current market conditions as related to real estate. Currently mortgage rates are below 5% again for 30 fixed rate mortgates. Home prices are still very low, but statistics have shown that very slight increases in home prices have been occuring in some real estate markets. Overall sales are also up from this time last year. These are signs that the housing market is headed in the right direction. However, although we are seeing increases in sales and very slight increases in home prices, the market will most likely be slow to recover. This is due to the fact that we still have a lot of properties that are going to going into foreclosure. This will make it hard for homeprices to go up. Also, with unemployment rate being so high, the amount of people that are able to buy homes will not be as high as it has been in the past.
If you are in the market to buy a home though, I would suggest making a move, especially if you are a first time homebuyer. Interest rates being below 5% is an incredible opportunity that could save you a lot of money over the course of paying off a home loan. It is likely that interest rates will go up to around 7% in the near future in order to curb inflation. This 2% increase could mean you are paying a couple hundred dollars a month extra on your mortgage payment. Also, if you are a first time homebuyer, if you close on a home by November 30th, you might be eligible to receive up to an $8000 tax credit from the government next year when you file your taxes. A tax credit is subtracted directly from your tax bill, so if you owe the government $2000, you will get back $6000 if you qualify for the $8000 tax credit. Finally, with home prices being at 2002-2003 levels now, the affordability of homes is great. If you have been sitting on the fence, get off and buy a home.
Please feel free to contact me if you all have any questions pertaining to real estate, and I would be glad to help answer your questions.